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Is there a risk-return trade-off? Evidences from Chinese stock markets

Author

Listed:
  • KONG Dongmin

    (Department of Finance, Huazhong University of Science and Technology, Wuhan 430074, China)

  • LIU Hening

    (Department of Economics, Northern Illinois University, Dekalb, IL 60115, US)

  • WANG Le

    (Population Center, University of Minnesota, Minneapolis, MN 55455, US)

Abstract

Employing a recently developed method-mixed data sampling (MIDAS) approach - to assess the risk-return trade-off for Chinese stock markets, our results are striking. First, we fail to find any evidence of the risk-return trade-off in the first subsample (Jan 1993¨CJan 2001), while we do find the existence of such relationship in the second subsample (Feb 2001¨CDec 2005); such results suggest that as the markets become more mature, risks are compensated more properly. Second, we also compare the MIDAS results with the results obtained from conventional approaches such as the GARCH-type model. Our results are reasonably robust to the methods that we use, and the MIDAS and GARCH-type approaches outperform rolling-window approach in terms of modeling volatility.

Suggested Citation

  • KONG Dongmin & LIU Hening & WANG Le, 2008. "Is there a risk-return trade-off? Evidences from Chinese stock markets," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 3(1), pages 1-14, March.
    • Handle: RePEc:fec:journl:v:3:y:2008:i:1:p:1-14
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    File URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-008-0001-0
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    Citations

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    Cited by:

    1. Jiranyakul, Komain, 2011. "On the Risk-Return Tradeoff in the Stock Exchange of Thailand: New Evidence," MPRA Paper 45583, University Library of Munich, Germany.
    2. Cheng, Hang & Guo, Hui & Shi, Yongdong, 2024. "Multifactor conditional equity premium model: Evidence from China's stock market," Journal of Banking & Finance, Elsevier, vol. 161(C).
    3. Mohanty, Roshni & P, Srinivasan, 2014. "The Time-Varying Risk and Return Trade Off in Indian Stock Markets," MPRA Paper 55660, University Library of Munich, Germany.
    4. Gong, Yuting & Chen, Qiang & Liang, Jufang, 2018. "A mixed data sampling copula model for the return-liquidity dependence in stock index futures markets," Economic Modelling, Elsevier, vol. 68(C), pages 586-598.

    More about this item

    Keywords

    risk-return trade-off; MIDAS; Chinese stock markets;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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